24th September 2014

It's down to 0.9% from 1.2% in July, but core
inflation remains elevated

Source: Straits Times / Top of The News

THE tepid property market and declining car prices kept a lid on price
rises in August.

Inflation eased to a six-month low of 0.9 per cent last month, down from
1.2 per cent in July.

Despite the low headline inflation number, economists say the Monetary
Authority of Singapore (MAS) will not ease up on its stance of allowing a
"modest and gradual" appreciation of the Singapore dollar at its
meeting next month to set exchange rate policy.

This is because core inflation, which excludes the cost of accommodation
and private road transport, remains elevated on the back of domestic cost
pressures, particularly from the tight labour market. The core inflation figure
released by the MAS is seen as a better gauge of out-of-pocket cash expenses
for most households. It inched down slightly to 2.1 per cent last month, from
July's 2.2 per cent.

The exchange rate is the Government's main tool to combat inflation: A
stronger currency means imports cost less in Singdollar terms.

The Singdollar is managed against a basket of currencies of Singapore's
major trading partners. The MAS will release a policy statement next month
which will set the tone for how the currency will perform for the next six
months.

Given that official forecasts tip core inflation to remain
"elevated" at between 2 per cent and 3 per cent this year, it is
unlikely MAS will let go of the reins when it comes to its Singdollar policy
stance, said Citi economist Kit Wei Zheng.

He added that economic growth is also expected to pick up in this
quarter, which "should allay concerns over the growth outlook for
now".

Last month's benign inflation figure was due mainly to a decline in the
cost of private road transport, which includes car prices.

Private road transport costs fell 2.9 per cent last month over the same
month last year, largely due to lower certificate of entitlement (COE)
premiums. This extended July's 1.6 per cent fall.

Prices at the petrol pump also rose at a slower pace of 0.7 per cent
compared with 3.1 per cent a month ago, on account of the recent weakness in
global oil prices.

Overall food inflation was slightly lower at 2.9 per cent compared with
3 per cent a month ago. Non-cooked food prices, however, rose at a quicker pace
of 3.4 per cent from 2.8 per cent in July, reflecting costlier seafood and
vegetables.

Accommodation costs dipped 0.2 per cent - entering negative territory
for the first time since June 2010 - due to a soft rental market. Inflation in
this category is in its ninth consecutive month of decline amid continued
weakness in the property market, said Barclays economist Leong Wai Ho.

As COE prices have also stabilised, the recent trend of benign - if not
weak - headline inflation alongside higher core inflation is "likely to
persist for the remainder of the year", he added.

Overall inflation is expected to "remain subdued" over the
rest of the year due to continued drag from the faltering property market and
car prices, the MAS and Ministry of Trade and Industry said yesterday in a
joint statement.

Inflation is expected to come in at between 1.5 per cent and 2 per cent
for the full year, according to official forecasts.

SINGAPORE is the sixth most expensive city for companies to locate
employees, according to a new survey.

The survey compiled by property firm Savills measures the total yearly
costs per employee of renting living and working space in US dollars in 12
cities, as well as additional costs such as local taxes. The ranking in the
form of an index was launched in 2008, with Singapore also coming in sixth that
year.

London topped this year's list, overtaking Hong Kong, which had
previously led the pack for an unbroken five-year period.

Changes in total living and working costs reflect not only the strength
of a city's residential and office markets and occupier taxes and costs, but
also the impact of fluctuating exchange rates, Savills said.

The sterling's appreciation against the greenback up until June, coupled
with significant increases in office rents, pushed up London's total costs in
US dollar terms. Real estate costs in the British capital grew in US dollar
terms by an annualised rate of 10.6 per cent in the first six months of the year.

Despite climbing from fifth to first place since 2008, London is still
off the record set by Hong Kong in 2011 at US$128,000 per employee per year.
Hong Kong's position relative to the emerging markets of mainland China means
that it is likely to remain an attractive location for companies, despite
property-market cooling measures.

It remains by far the most expensive city in which to buy a home, with
prices 40 per cent higher than London's, said Savills.

At the other end of the table, costs in comparatively affordable Rio de
Janeiro have risen 85 per cent since 2008, while they are up 58 per cent in
Sydney.

Mumbai retains its position as the cheapest city, at about US$30,000 per
person per year, down 21 per cent in US dollar terms since 2008.

"This year has seen much more modest real estate price growth in
nearly all our world cities and some have shown small falls," said Ms
Yolande Barnes, director of Savills World Research.

"This lower level of price growth means that currency fluctuations
have produced some of the biggest changes in our rankings, which are expressed
in dollar terms."

-By Chai Yan Min

London pips HK
as priciest city to rent homes, offices

Singapore drops a spot to No 6 in Savills study of 12 global
cities

Source: Business Times / Top Stories

[SINGAPORE] London has become the world's most expensive city for
companies to locate employees, overtaking Hong Kong, which had previously
topped the list for an unbroken five-year period, according to property
consulting group Savills.

Singapore is in sixth position in the latest ranking of 12 global
cities as at June 2014 - unchanged from the December 2008 list.

Savills compares the cost of renting living and working space for
a group of employees in the financial sector and the creative industry, stated
in US dollar terms.

The total costs for each city reflect not only the strength of its
residential and office markets and the level of occupier taxes and costs (such
as service charges), measured at the local level, but also the impact of
exchange rates on doing business on a world stage, Savills said. "It is
this that has contributed in large part to London's recent ascendency in the
rankings."

A TUAS Bay Close industrial plot for which the highest bid was shy
of the consultants' forecasts points to further signs of a cooling industrial
property market, as the effects of the government's anti-speculation measures
kick in.

Mezzo Development beat two other bidders, Wee Hur Development and
Soilbuild Group Holdings, to submit the top bid of S$25.5 million, JTC
announced on Tuesday. This works out to S$51.28 per sq ft per plot ratio (psf
ppr).

This land price is the lowest since a Yishun Street 23 plot sold
in Oct 2010 for S$64 million (S$51.10 psf ppr), SLP International executive
director Nicholas Mak noted.

Another B2-zoned plot in nearby Tuas South Avenue 7 - dubbed Plot
12 and which has about the same size and tenure - sold for S$31 million (S$56.01
psf ppr) in August. Already considered a low price then, it was still higher
than that of this latest highest bid.

LAKE Life, an upcoming "smart" executive condominium
(EC) in the Jurong Lake District, will be Singapore's first condo to run a
driverless electric shuttle vehicle between the development and the nearby
Lakeside MRT station.

The shuttle service remains subject to approval by the Land
Transport Authority, but the developer of the condo, a consortium led by Evia
Real Estate, is already working on it with Shado, a young Singapore-based car
design firm and the National University of Singapore.

Designed by British car designer Steve Harper, the prototype is
now being built in the UK and will likely be ready by the fourth quarter of
this year.

Anticipating a future where electric cars will be the norm, the
developer is providing a charging bay in the residents' carpark.

IT IS
becoming harder than ever for Housing Board upgraders to make the leap to
private property, despite softening prices.

The price
gap between an HDB flat and one in a private condo has widened, hampering those
who rely on resale proceeds to fund their new home - not least in the light of
tougher home loan curbs.

A 2011
Goldman Sachs study found that the price gap in the first quarter of that year
was $490 per sq ft, a record then. That means a 1,000 sq ft condominium unit
would have cost $490,000 more than a resale HDB flat with the same floor area.

A
five-room HDB flat is slightly larger than 1,000 sq ft.

New
figures from the Singapore Real Estate Exchange suggest the gap has only
widened since.

Their
calculations put the gap in median resale prices at $383 per sq ft in the first
quarter of 2011 but that had shot up to to $524 per sq ft by the second quarter
of this year.

The gap is
even wider for new private units, having risen from $556 per sq ft to $753 per
sq ft.

These
calculations were based on prices of HDB five-room flats and condominiums
outside the central region, to reflect the typical upgrade.

"It
does mean that private housing for HDB upgraders is becoming more
unaffordable," said SLP International Property Consultants research head
Nicholas Mak.

But the
growing gap is unsurprising, given the different trends in private and public
property, said experts.

The Urban
Redevelopment Authority's resale price index shows that values of non-landed
private property outside the central region have risen by 17.3 per cent overall
since the first quarter of 2011.

The HDB's
resale price index rose only about 12 per cent over the same period.

Several
rounds of government cooling measures have begun to bite, and both markets are
now on a decline. But public housing prices have been falling faster -
contributing to the widening gap.

HDB prices
started falling after the second quarter of last year, and have dropped 5.3 per
cent since then. The private property index started falling from the third
quarter, and has lost 3 per cent since.

R'ST
Research director Ong Kah Seng does not see this as cause for alarm: "I
think it is not a major concern now because in the years of 2010 to the first
half of 2013, there were ample HDB upgraders... Many HDB upgraders have already
fulfilled their dreams of upgrading."

Executive
condominiums, which are bought as public housing but become fully private after
10 years, could also bridge the gap, as they are cheaper than private units,
said Chris International director Chris Koh.

Mr Jedric
Goh, 34, is willing to be even more flexible as he tests market interest for
his five-room flat in Serangoon.

In this
market, going private would be "quite tough", so he is not limiting
his options that way.

"I'm
looking at location instead of the type of property," said Mr Goh, who
works in the finance industry.

These were
some ideas on how to make Singapore a "smart city", thrown up at a
symposium on sustainability, environment and energy research at the National
University of Singapore (NUS) yesterday.

The topic
of efficient and vibrant cities took centre stage at the annual forum, which
was held for the third time. It was organised by the NUS Energy Office to look
at issues in environmental sustainability and showcase NUS' research.

Energy use
is twice the rate of change of urbanisation, said Professor Matheos
Santamouris, an expert in energy physics at the University of Athens who is now
a visiting professor at NUS.

Citing
studies, he pointed out that a 1 per cent rise in per capita gross national
product leads to an almost equal increase in energy consumption.

However,
energy use goes up by about 2 per cent when the urban population increases by 1
per cent, added Prof Santamouris, who also spoke about the Smart Cities
Programme in the European Union.

Dr Lai
Choo Malone-Lee, director of the Centre for Sustainable Asian Studies at NUS,
said that to ensure that resources are used effectively as in smart cities,
cities can look into better land use integration.

The
upcoming developments in the Jurong Lake area will make for a good case study
on mixed-used development - where land space can be used optimally for multiple
purposes.

"If
done well, it can create more compact, multi-use developments, more optimal
infrastructure sharing, and reduce the load on transport," she said.

Other
measures that Singapore could look into include greater harnessing of waste to
energy, she said.

In a smart
city, technologies are used to make services and networks more efficient.

Transforming
Singapore into a smart city was a topic discussed during the World Cities
Summit in June.

Ministers
and senior officials from economies such as Singapore and Hong Kong said then
that more smart-city technologies could be used to run cities better and
improve the lives of residents.

THE rush
among start-ups to snare a spot at the upcoming JTC LaunchPad @ one-north may
prompt the Government to provide even more such space.

More than
90 per cent of the facility in Ayer Rajah Crescent will be occupied when it is
ready by the end of the year, noted Mr Teo Ser Luck, Minister of State for
Trade and Industry.

"If
we pilot it and it goes well, and we refine some of the policies ... the way we
run it, and we learn from it, then I think we are ready for (LaunchPads) 2 and
3, because I think there's demand," Mr Teo said during a visit to
home-grown engineering start-up Hope Technik on Monday.

The
LaunchPad, which will be the first start-up cluster in Singapore, will be able to
house around 500 enterprises, with many expected to be home-grown.

"We're
very excited that these local companies, (which) we're seeing more and more of,
are willing to take up the journey of entrepreneurship, and we hope that
international investors will come in ... identify the good ones and invest in
them."

The
LaunchPad, which will have cafes, sports facilities as well as indoor and
outdoor spaces for meetings, aims to be "inclusive" when selecting
start-ups. "As long as your products and services are promising and you
can differentiate from the competition, we will definitely want you to have a
place," Mr Teo said.

He added
that there are plans for an advisory panel to be set up within Action Community
for Entrepreneurship (ACE) by the end of the year. It will comprise eight to 10
"prominent" local and international entrepreneurs.

"We
are going to do something that will help Singaporeans take this
entrepreneurship journey but, at the same time, we will also position Singapore
worldwide and, hopefully, some of them will also become successful companies
internationally," he said.

ACE was
set up by public-agency officials and private-sector business leaders in 2003
to spearhead the push for entrepreneurship.

It is
being spun off and will be led by private-sector individuals as part of the
Government's moves to introduce new ways of nurturing entrepreneurship.

CREDIT-RATING agency Standard & Poor's (S&P) said on
Tuesday that Keppel Reit's BBB rating is not affected by its proposed
acquisition of a one-third stake in Marina Bay Financial Centre (MBFC) Tower 3.

The net purchase price is about S$1.2 billion.

"We expect the acquisition to enhance Keppel Reit's portfolio
while keeping its financial strength intact," S&P said, in a largely
positive note on the purchase.

It added that the real estate investment trust's portfolio quality
in the central business district (CBD) will improve. Keppel Reit sold
16-year-old Prudential Tower in May, leading to talk that it would use the cash
proceeds to buy Keppel Land's stake in the two-year-old MBFC Tower 3.

I refer to the letter “Curb supply to avert dangers of a burst
property bubble” (Sept 23).

I disagree that the authorities must curb property supply. Prices
have risen 60 per cent over the past four years and have adjusted by only 3.3
per cent over the past three quarters. Property here is still overpriced.

Those who bought property earlier may have expected prices to go
higher, but that would be dangerous. Singapore relies on foreign investments,
and property prices affect business costs.

Already, the Republic is an expensive city. If investors start to
leave, people would start to lose jobs, our spending power would weaken and
property prices would be hit, too.

Looking at short-term benefits can bring long-term pain.

One should not think that property investment in Singapore is a
guarantee of profit, and then blame the Government when it is otherwise. The
actions to correct prices were a bit late, so the adjustment should continue
for a few years until prices are reasonable.

At a recent seminar, Associate Professor Lum Sau Kim from the
National University of Singapore (NUS) noted that the use of Central Provident
Fund (CPF) monies for housing payment had constrained retirement adequacy.

“If so much of CPF funds are dedicated to housing, then we have
poorly diversified household portfolios ... the nest egg that we have will be
vulnerable to housing sector shocks and greater risks,” she said.

This raised an important question on whether the use of CPF
savings for housing has been too liberal and whether it is time to impose
limits to enhance Singaporeans’ retirement adequacy.

There are pros and cons to linking CPF to housing. The benefit is
clear, for without the provision to use CPF to fund property loans, far fewer
Singaporeans would be able to buy a home. Currently, home ownership rate stands
at about 90 per cent, among the highest in the world.

However, on the flipside, linking CPF monies to housing makes
Singaporeans’ retirement funds vulnerable to the cyclical patterns of the
property market. For instance, when the property market contracts and
valuations plunge, CPF members who are retiring and intending to unlock some or
all of their housing assets to fund their retirement could be heavily hit.

Even if property prices surge, they may not be able to afford
another home after selling the current one — unless they move in with family or
friends. So while they might be sitting on an S$800,000 property, they may well
have much less in the bank for their daily needs.

The Government is clearly keen to address Singaporeans’ concerns
on retirement adequacy. The recent revision to the Lease Buyback Scheme — where
Housing and Development Board (HDB) flat owners sell back part of the remaining
lease to the Government — is a case in point.

But I believe the crux of the problem is the way Singaporeans use
their CPF monies to buy property.

Many Singaporeans are currently pledging most, if not all, of
their Ordinary Account contributions to housing, an illiquid asset. This might
not be the most prudent approach to retirement planning. Even if there is a
lack of viable investment vehicles in Singapore for retirement planning, a
retirement portfolio needs to be well-diversified and not one that places most,
if not all, eggs into one basket. There should also be a cash savings component
in the portfolio that caters for a rainy day such as a medical emergency.

HOW A CAP WORKS

In a 2012 paper, NUS economic professors Chia Ngee Choon and
Albert Tsui suggested that while it may be an uphill task to delink housing
financing from CPF completely, more measures can be implemented to ensure that
younger Singaporeans buy only homes they can afford. This is a viewpoint that
has garnered support among retirement-planning professionals in the private
sector.

The professors’ housing consumption sensitivity analysis indicated
that there is a strong trade-off between housing consumption and retirement
adequacy. For example, a median male earner (monthly salary of S$2,500) who
enters the workforce today and goes on to buy a four-room HDB flat will have a
net Income Replacement Ratio (IRR) of 70 per cent. But if he buys a five-room
flat instead, his net IRR dips to 58 per cent, a staggering 12-percentage-point
differential.

IRR is defined as the percentage of working income an individual
needs to maintain the same standard of living in retirement he had enjoyed
while still active in the workforce. The lower the IRR, the worse off the
retiree will be in his golden years.

To expand upon the professors’ prudent approach, a cap could be
imposed on the amount of Ordinary Account funds that is made available for
housing purchases. For example, a 50-per-cent cap on the use of CPF funds to
finance housing will ensure more savings will be set aside for retirement.

Let’s use the same median male earner with a monthly salary of
S$2,500 to illustrate this. Let’s say he wants to buy a new four-room HDB flat
and needs to take a 30-year-old loan of S$300,000 at an interest rate of 1.5
per cent. If the 50 per cent cap is applied, his household will have to come up
with an additional S$6,155 per annum in cash payments for the flat. This
transfers into almost S$513 per month, or about 25 per cent of his take-home
pay of S$2,000. This percentage would not be considered onerous and would drop
as his income grows along with career progression. The upside for him is that
he would get S$15,000 more in retirement income every year when he retires at
62.

The policy rationale allowing Singaporeans to draw heavily on
their CPF funds to pay for housing in the past is understandable as the
priority was to make Singaporeans homeowners and to give them a stake in the
nation’s future. But with greater life expectancy and an ageing population, the
need to help Singaporeans enjoy retirement adequacy suggests it is perhaps time
to rethink this policy.

If young Singaporeans, confident of their future earning power,
want to buy a bigger first home, they should by all means seize that
opportunity. But the caveat is that they should plan their finances carefully
and not depend primarily on their CPF accounts.

A cap on the use of CPF for housing could provide the balance
necessary to fund property ownership, but not at the expense of retirement
funds.

While I do not disagree about the effects of panic selling in a
property bubble, I disagree that the situation necessitates action from our
authorities, as recommended in the letter “Curb supply to avert dangers of a
burst property bubble” (Sept 23).

Firstly, over a 15-year period, property prices have more than
doubled, with the hottest growth in the past five years — small wonder then
that Singaporeans have relatively hefty mortgages now.

Even a modest 1,000sqf apartment exceeds S$1 million.

This is clearly untenable. While the authorities had instituted a
series of cooling measures, it was the last one, the Total Debt Servicing Ratio
of 60 per cent, that is proving to be the most effective.

Secondly, the surge in supply — 83,633 upcoming private homes (and
21,268 currently vacant units) — peaking next year and in 2016 was anticipated.
Buyers, developers and banks went in with their eyes open.

On top of that, it was known that only about 8,000 private units
were added annually in the past 10 years.

Thirdly, home ownership is a big, long-term investment for every
family; decisions taken must be thought through. Singapore has public housing
and there is no shame if one cannot afford or is not ready to buy private
property.

Finally, those who leveraged to buy a home for occupancy will
endure the ups and downs of the market, which are but paper gains or losses.

The real pain is for buyers of two or more properties with
sizeable loans. In wanting quick riches, these borrowers could pay the price
for any major downward correction through a potential default or top-up
required by the bank for mortgage security.

Unfortunately, buyers who lacked financial prudence would
similarly have to pay for rushing into the then red-hot market.

But the authorities have taken the correct steps.

There would have been a drastic collapse eventually if the market
had been allowed to operate unchecked in the past few years. A correction is
now timely, accentuated by the oversupply, declining rental opportunities and
rising interest rates.

Unlike in the United States, most Singaporeans are generally
conservative and prudent, which explains why our banks are paying less than 1.5
per cent for time deposits.

If the market corrects substantially, it gives new opportunities
for these conservative Singaporeans to buy a private property at an affordable
price, creating a new market and a consequential pick-up in demand.

Skanska USA quit as construction manager for Forest City Ratner Cos.’ prefabricated apartment tower development in Brooklyn, New York, after disputes between the two sides over the project’s design and costs.

Skanska terminated its contract because of “material breaches” by Forest City Ratner, the Stockholm-based company said in an e-mailed statement. The Atlantic Yards project, called B2, has been stalled since late last month.

“Today is an incredibly disappointing day,” Richard Kennedy, co-chief operating officer of Skanska USA Building, said in the statement. “While the B2 project certainly has its issues, we were hopeful that our client and partner would address them so we could move forward with building much-needed affordable housing in Brooklyn.”

The 34-story, 363-unit apartment tower would be the world’s tallest modular building. Forest City Ratner executives have said that building pre-fabricated units of the tower off-site and then piecing them together, was a technology that would save time, money and reduce construction traffic.

The companies have traded lawsuits in New York State Supreme Court blaming the other for delays, design flaws and cost increases.

Forest City Ratner, in its own statement today, said Skanska “blindsided us” when it stopped construction, and has been unresponsive to its efforts to resolve their differences.

Skanska is “making clear again that they have no intention of moving this project forward.” MaryAnne Gilmartin, chief executive officer of New York-based Forest City Ratner, said in an e-mailed statement. “We believe in modular and have worked tirelessly to get B2 back on track.”

Forest City is the initial developer of the $4.9 billion Atlantic Yards project, which includes the Barclays Center arena, home of the National Basketball Association’s Brooklyn Nets since 2012. The 22-acre (9-hectare) development, which has been renamed Pacific Park, is to include 14 apartment buildings.

Offices on the highest floors of skyscrapers in San Francisco and New York soared in value since March, boosted by growing technology and energy businesses, Knight Frank LLP said.

The upper floors of office towers, which command the highest rent, are valued at $2,260 a square foot in San Francisco, a gain of more than 60 percent from March, according to an index compiled by the London-based property broker. In Manhattan, values have climbed 25 percent to $2,980. At the same time, slowing Chinese growth caused prices to fall in Singapore and Hong Kong, though the latter remains the most expensive at $6,330, Knight Frank said in a report today.

“The U.S. is proving to be the comeback kid, boosted by new technology firms and shale gas,” James Roberts, the firm’s head of commercial research, said by e-mail. “Growth has been fastest in the city with the most tech exposure, namely San Francisco.”

San Francisco moved to fifth in the skyscraper value rankings from ninth in March, the biggest increase among buildings of more than 20 stories in the 15 cities included in the survey, the broker said. Almost three-quarters of the tenant deals in the year through June were signed by technology firms such as social media and mobile-applications startups, CBRE Group Inc. said in August.

San Francisco Rentals

Salesforce.com Inc., the biggest maker of customer-management software, agreed in April to lease more than half of Boston Properties Inc.’s tower at 415 Mission St., slated to be the city’s tallest when it’s completed in 2017. Vornado Realty Trust is seeking more technology tenants after signing a lease with Microsoft Corp. for 555 California Street, once Bank of America Corp.’s world headquarters.

Declines in Hong Kong and Singapore reflect “more challenging times in the Asia Pacific economy, which is adapting to a world where China’s economy will grow at a slower pace,” Roberts said. Rents in Hong Kong are starting to rise again after falling last year, according to the Knight Frank report. Upper-floor office values declined by about $100 a square foot in the city since March.

Tokyo ranked second in the index, followed by New York and London, the world’s most expensive city to employ staff, according to Savills Plc. Singapore slipped to sixth from fourth after values fell almost 10 percent to $2,000 a square foot, excluding currency adjustments, according to data compiled by Knight Frank.

The broker’s Global Cities Index, which tracks prime office rents in the 15 cities, is forecast to grow about 20 percent over the next five years. The best performer is expected to be San Francisco with a 36.2 percent increase, followed by Singapore with a gain of more than 22 percent, the most in the Asia Pacific region. Madrid will lead Europe’s major cities with a 28.7 percent gain, the broker estimated.

Mumbai was the top-ranking city for prime office yields, a combination of rent and changes in value, at 10.25 percent for this year. Hong Kong offered the lowest yields at 2.9 percent, according to the data.

Verizon Communications Inc. (VZ) is pushing for a sale of its wireless network towers by year-end, according to people familiar with the situation, in a deal that may raise about $6 billion for spectrum purchases.

Verizon, the biggest U.S. mobile-phone company, has hired TAP Advisors LLC, a New York boutique investment bank, to work on a tower sale and leasing agreement, two of the people said. The package would involve about 12,000 towers and could be announced within 30 to 60 days, according to one of the people, who asked not to be identified because the discussions were private.

A sale could bring in about $6 billion, based on the price per tower that AT&T Inc. (T) got in a tower deal last year. Wireless carriers have turned to tower sales as a way to raise cash at a time when tower operators like Crown Castle International Corp. (CCI), American Tower Corp. (AMT) and SBA Communications Corp. (SBAC) have been eager buyers.

TAP has been an adviser to the sellers in the last two major U.S. tower deals, with Houston-based Crown Castle as the buyer in each. AT&T sold 600 towers and the exclusive rights to lease 9,100 more towers for an average of 28 years for $4.83 billion. T-Mobile US Inc. got $2.4 billion in 2012 for the rights to operate 7,200 towers.

Bob Varettoni, a spokesman for New York-based Verizon, declined to comment. A company representative at TAP Advisors wasn’t immediately available for comment.

Eyes Opened

An infusion of cash would give Verizon more flexibility after its debt ballooned to finance the $130 billion deal to buy full control of its wireless unit earlier this year. Verizon’s had net debt of $104.2 billion at the end of June, or about 2.4 times its annual earnings before interest, tax, depreciation and amortization. That compared with a ratio of 1.0 times earnings a year earlier.

AT&T’s deal “opened our eyes” to the appeal of a tower sale, Verizon Chief Financial Officer Fran Shammo said last week at an investor conference. While the company had previously resisted the idea of divesting its network real estate, executives saw how AT&T got immediate cash by selling its towers to Crown Castle.

Verizon is expected to participate in the Federal Communications Commission’s airwave sale in November, an auction that may raise at least $11 billion, according to Barclays Plc. That makes it the most significant airwave auction since 2008, Barclays said in a note this week.

Tower operators have sought acquisitions because they can reap bigger profits by using the assets to serve multiple wireless carriers.

Shares of Crown Castle and Verizon were little changed at 10:39 a.m. in New York.

Crown Castle has told Verizon it would be interested in a deal, and that the towers would “provide great attractive growth opportunities in our business,” Jay Brown, the tower company’s CFO, said last week at the investor conference.

Norway has vaulted to the top ranks of foreign U.S. commercial real estate buyers as its $870 billion sovereign-wealth fund, the world’s largest, acquires buildings from New York to San Francisco.

The country has spent more than $3.2 billion on U.S. real estate this year, including the assumption of debt, according to research firm Real Capital Analytics Inc. and statements from the wealth fund. That makes it the biggest international buyer after Canada. The total is more than double the amount spent in all of 2013, when Norway ranked No. 6 for property purchases.

Norway, which has a smaller population than New York City, is spending billions of dollars on properties globally as its wealth fund seeks to meet a target to invest as much as 5 percent of its assets in real estate. In the U.S., prices for top-quality buildings in major markets are being driven up by foreign funds that often are willing to accept lower yields than domestic buyers in return for a safe place to put their money, according to research firm Green Street Advisors Inc.

“There’s an element of perceived safety in a hard asset in the United States, in New York City, that is harder to replicate in other alternatives,” said Michael Knott, a managing director at Newport Beach, California-based Green Street. Investors such as the Norwegian fund “have the ability to hold indefinitely and probably not be troubled at all by a low going-in yield.”

Manhattan, Boston

Norway’s most recent U.S. deal was the $1.5 billion acquisition last week of stakes in three towers from Boston Properties Inc. (BXP), the largest U.S. office real estate investment trust. The wealth fund agreed to buy 45 percent stakes in 601 Lexington Ave. in Manhattan, once known as Citigroup Center, and in Boston’s Atlantic Wharf Office Building and 100 Federal St.

The deal’s capitalization rate of 3.8 percent approaches the record-low investment yields from the prior property boom in 2007, according to Green Street. Cap rates are net operating income divided by purchase price.

Norway’s wealth fund began buying real estate outside Europe last year. It held $10.3 billion of property worldwide as of June 30, or 1.2 percent of total assets at the time. Norges Bank Investment Management said in June it plans to increase staffing by about 60 percent in the next three years to tackle increased investments in real estate.

TIAA-CREF

Karsten Kallevig, chief investment officer for real estate at the Oslo-based fund, began his U.S. foray in February 2013, through a joint venture with TIAA-CREF for stakes in five office buildings. Earlier this month, Norges Bank Investment Management bought a 49.9 percent stake in San Francisco’s Orrick Building for $139.7 million through its alliance with the money manager.

Thomas Sevang, a spokesman for the wealth fund, declined to comment on its real estate purchases.

Demand from sovereign-wealth funds and foreign pension funds is driving cap rates lower “at the margin,” said Spencer Levy, head of Americas research at Los Angeles-based CBRE Group Inc. (CBG), the largest commercial brokerage. Such buyers have a strong appetite for prime real estate and can afford to pay more because of their low cost of capital, a trend likely to continue if fixed-income yields remain low, he said. The yield on the 10-year Treasury note has risen almost 20 basis points this month to 2.54 percent. A basis point is .01 percentage point.

“If the relative value of real estate -- notwithstanding the fact that the absolute price appears high -- is better than other alternatives, you’re still going to maintain strong price stability,” Levy said.

Canadian Stake

The Canada Pension Plan Investment Board in June spent $108 million to increase its stake in the One Park Avenue office building in Manhattan to 45 percent, from about 11 percent, through a joint venture with Vornado Realty Trust. (VNO) In May, a partnership led by the property unit of the Ontario Municipal Employees Retirement System agreed to buy five Boston-area office buildings from Blackstone Group LP for $2.1 billion.

Foreign investors account for about 20 percent to 30 percent of commercial real estate transactions in dollar terms in New York and Washington, compared with 10 percent to 20 percent in areas including Los Angeles, San Francisco and Houston, said Michael Sobolik, regional director of research for North America at Dallas-based Invesco Real Estate, which manages about $61.5 billion globally.

“Sovereign wealth funds tend to focus their transaction activity on large-sized assets,” he said. “Thus they exert more impact on this segment of the market.”

Foreign investors typically buy less than 50 percent of individual U.S. properties to avoid incurring taxes under a 1980 U.S. law when they sell.

Warehouse Acquisitions

In January, Norges Bank Investment Management bought stakes in 66 U.S. warehouse properties through a $1 billion venture with Prologis Inc. (PLD), the world’s biggest industrial landlord. In July, it bought a stake in One Beacon St., a Boston office property, through a venture with MetLife Inc., the largest U.S. life insurance company. Norges Bank Investment Management also holds shares of publicly traded U.S. REITs, including shopping-center landlords.

The fund, as a relatively new buyer to the scene, “does shrink the space available in an auction tent that was already crowded,” said Knott of Green Street. “Anytime you add in a motivated buyer with a big checkbook, that is going to at the margin increase asset values, but I don’t think it’s quantifiable.”

Canada has been the biggest foreign buyer of U.S. real estate since 2010, according to Real Capital. Canadian investors have acquired stakes in properties worth $8.3 billion this year, after $11.1 billion of deals in all of 2013, according to the New York-based company.

Norway, Western Europe’s biggest oil and gas producer, puts most of its petroleum revenue into its global pension fund, which invests 60 percent in stocks, 35 percent in bonds and 5 percent in real estate.

A triplex penthouse at Zeckendorf Development Co.’s tower under construction on Manhattan’s Upper East Side will be offered for sale at $130 million, making it New York’s most expensive apartment listing.

The 12,394-square-foot (1,151-square-meter) property will span the top three floors at 520 Park Ave., where sales will begin the first quarter of next year, Arthur Zeckendorf said in an interview today.

The tower’s offering plan, which details units for sale and their prices, was approved by the New York State attorney general’s office last week, allowing the developer to begin marketing the 31 apartments, Zeckendorf said. The building, between 60th and 61st streets, will include seven duplexes of about 9,138 square feet each, starting at $67 million, according to the plans. Single-floor units of about 4,600 square feet will start at $16.2 million.

The triplex would be the most expensive listing for an apartment in New York history, Jonathan Miller, president of appraiser Miller Samuel Inc., said in an interview.

“In the best-case scenario, it is providing a bold stroke to the market, implying that there are buyers out there for this price point,” said Miller, who is also a Bloomberg View contributor.

Woolworth Building

In plans filed with the attorney general’s office, developers of condos at lower Manhattan’s landmark Woolworth Building said they were seeking $110 million for the penthouse atop the 58-story tower.

The triplex at 520 Park Ave., slated for completion in 2017, will be the largest on the Upper East Side, Zeckendorf said. The unit also has a 1,257-square-foot terrace with views of Central Park to the north.

“We wanted to create what we consider the greatest apartment on the Upper East Side,” said Zeckendorf, co-chairman of the development company with his brother, William Lie Zeckendorf.

The asking price works out to about $10,000 a square foot, which is the average resale price of condos that face the park at the Zeckendorfs’ 15 Central Park West, he said. At that complex, on the Upper West Side, former Citigroup Inc. Chairman Sanford Weill sold his penthouse for $88 million in 2012, Manhattan’s most expensive completed residential deal.

The 160 units at Santa Monica,California’s Belmar Apartments received 4,600 applications ahead of the project’s July opening, a measure of the competition for scarce affordable housing.

The Related Cos. project, where two-bedroom units rent for $946 a month, is among the last built with financing from redevelopment agencies, the taxpayer-backed programs that Governor Jerry Brown eliminated three years ago to help balance California’s budget. Without that source of $1 billion a year, the state’s supply of funds for building low- and moderate-income housing is running dry as real estate prices surge.

“The abolishment of the redevelopment agencies by Governor Brown is the single biggest problem” for affordable housing, said William Witte, president of Related’s California division, which also is seeking buyers for condominiums next to Belmar with an average price of $2.4 million. “Since there’s little to no help from the federal government, the loss of redevelopment funds is devastating.”

As Brown runs for re-election, the most-populous state faces a shortage of about 1 million affordable homes, according to the California Housing Partnership Corp. The state’s economic renaissance, fueled by the growth of technology companies including Apple Inc. (AAPL) and Google Inc. (GOOG), is leading to surging rents and home prices that are outpacing wage gains, leaving fewer households able to limit their residential spending to 30 percent or less of the local median income.

‘Hot Economy’

“It is one of the negative consequences of a hot economy,” Brown said during a Sept. 10 press conference in Los Angeles. “Under the capitalist regime, when prices are bid up, the prices go up.”

Renters in the Los Angeles area pay about 48 percent of their incomes for shelter, the biggest share of any major U.S. city, according to a report last month by property-research companyZillow Inc. (Z) The second-largest U.S. metropolis has a 490,000 affordable-unit deficit, according to the not-for-profit California Housing Partnership. The partnership defines affordability as no more than 30 percent of the local median household income, which was $97,100 in San Francisco and $60,600 in the Los Angeles area, according to Department of Housing and Urban Development data.

In downtown Los Angeles, which has experienced a housing-development boom, more than 3,400 of the 20,000 apartments and condos built since 1999 are considered affordable. Of the area’s 22,000 units planned or under construction, just 69 are affordable, said the Central City Association of Los Angeles.

“There are no subsidies, no government assistance,” Carol Schatz, the group’s president, said in an interview.

Projects Planned

Downtown residential developments planned or under way include projects by Forest City Enterprises Inc. (FCE/A), MacFarlane Partners and Mack Urban, as well as the $1 billion Metropolis by Shanghai-based Greenland Holding Group Co., which will include apartments, condominiums and a hotel.

Government programs to intervene in the housing market, such as rent subsidies, have proven ineffective, Brown said during the question-and-answer portion of a Sept. 10 press conference on the signing of a worker sick-leave law.

“That has never provided much affordable housing, at least in the time that I’ve been around,” said Brown, 76, who’s seeking his fourth term as governor, including two terms from 1975 to 1983.

Financing Homes

Redevelopment agencies helped finance the construction and rehabilitation of almost 200,000 low- and moderate-income homes since 1984, said Tom Hart, the last executive director of the California Redevelopment Association, the lobbying group for the 400 local agencies. The agencies lacked accountability and did little to ease the affordable-housing shortage, Brown has said.

California, the world’s eighth-largest economy, has added 1.42 million jobs since the depths of the recession. The state’s total non-farm employment rose to a record 15.5 million positions in July, the most recent month for which figures are available, according to the U.S. Bureau of Labor Statistics.

In San Francisco, where technology companies including Twitter Inc. (TWTR) andSalesforce.com Inc. (CRM) are based, home prices jumped 14 percent in August from a year earlier to a median $940,000, CoreLogic DataQuick said. In Los Angeles County, values climbed 8.4 percent to $465,000, and statewide they gained 8.9 percent to $393,000, tying June’s median for the highest since December 2007, the Irvine, California-based real estate information service said. The state accounted for about 10 percent of U.S. residential sales last year.

Loan Qualifications

Only 30 percent of California households earned enough in the second quarter to qualify for a mortgage on a median-priced single-family home, down from 36 percent a year earlier, according to the California Association of Realtors. In the San Francisco Bay area, only 20 percent could qualify, the trade group said. That compares with 57 percent qualification rate nationally.

Pending home sales in the state fell 8.7 percent in August from a year earlier as “diminished housing affordability continued to hold back” transactions, the California Association of Realtors said in a report today.

“There’s a combination of declines in median incomes combined with a real-term increase in housing prices,” Matt Schwartz, president of the San Francisco-based California Housing Partnership, said in a telephone interview. “That’s a structural shift that we haven’t seen before. And that’s why we believe there’s a strong case for a major state intervention.”

‘Chilled’ Atmosphere

Brown has “chilled the atmosphere” for finding state solutions to the affordable-housing crunch, said Schwartz, whose group has six of its eight board members appointed by the governor. Last year, Brown vetoed a bill that would have let local governments require that developers devote a portion of their projects to affordable rentals. That decision put Brown “well on his way to becoming the most anti-affordable-housing governor in history,” Schwartz said at the time.

Developers say they need government assistance to build affordable housing. Redevelopment funds covered about a quarter of the cost of projects by Mercy Housing, a nonprofit builder that opened apartments this year in San Francisco’s Mission Bay district, said Doug Shoemaker, president of the Denver-based company’s California division.

The 150 low-income units in Mission Bay drew applications from 3,000 would-be renters, and a 90-unit senior-housing project in San Francisco’s Tenderloin district garnered 2,000 applications, according to Shoemaker. Mercy Housing is searching for funds to meet demand, he said.

Corporate Housing

“Any time I speak to corporate executives in banking, tech, hospitality -- really in any field -- they always talk to me about affordable housing because they can’t find a place for their workforce,” Shoemaker said. “If you look at what people earn in the hotel and retail sector, they can’t afford market-rate places.”

High housing costs threaten the economic recovery -- “California’s comeback” -- that Brown touts in his re-election campaign, according to Chris Thornberg, principal at Beacon Economics LLC, a Los Angeles-based research and consulting firm.

“If you don’t have housing, you can’t do labor,” he said in a telephone interview. “If you can’t do labor, you are missing a major ingredient for economic growth.”

Rents and home prices were a factor in Toyota Motor North America Inc. (7203)’s decision, announced in April, to relocate its headquarters from the Los Angeles suburb of Torrance to Plano,Texas, costing California at least 2,000 jobs.

Toyota Decision

“Plano will offer our employees many benefits, including a moderate cost of living, affordable housing and direct travel” to the automaker’s factories, suppliers and affiliates, Javier Moreno, a Toyota spokesman, said in an e-mail.

Anthony Hsieh, chief executive officer of mortgage company LoanDepot LLC, said he employs two-thirds of his 3,000 workers outside California, where the high costs of real estate and taxes make it tougher to recruit.

“As an employee or worker, your net cash to spend after housing is less than other states,” Hsieh, whose company has dual headquarters in Foothill Ranch, California, and Plano, said in a telephone interview.

Brown eliminated redevelopment agencies after repeated state budget deficits, including a $25 billion gap in 2011, the first year of his current term. This year’s budget has a gross surplus of $4.2 billion, with $1.6 billion banked into a “rainy day fund” for future downturns, according to H.D. Palmer, a spokesman for the California Department of Finance. The turnaround spurred Moody’s Investors Service to raise its view of California general obligation bond debt to a prime Aa3 rating in June, the highest since 2001.

Lacking Accountability

In addition to the budget savings from eliminating the agencies, Brown cited critical reports by the state controller and legislative analyst’s office that found a lack of accountability and billions of unused dollars for affordable housing on the agencies’ books.

“There were large balances in a lot of these agencies for low-income housing that had not been spent,” Palmer said.

Redevelopment agencies were required to spend at least 20 percent of their $5.5 billion in annual revenue on housing. After their elimination in 2012, the state redirected some of the savings -- $1.55 billion in the two most recent years combined -- to city, county and other local government agencies for any type of spending, Palmer said.

“If they want to apply it to affordable housing, there’s nothing to stop them from doing that,” Palmer said.

Easing Rules

Thornberg, the Los Angeles-based economist, said that redevelopment agencies never provided significant assistance to low- and moderate-income Californians seeking homes. Policy makers should instead focus on easing regulatory restrictions that hold up all types of housing projects, he said.

“When they were bragging how redevelopment agencies had created all these affordable housing units, that’s ridiculous,” he said. “The key is, you don’t build affordable housing, you build housing. Period. And parts of that will become affordable. It’s the trickle-down housing theory.”

Brown’s solutions for easing the affordable-housing shortage include construction of higher-density residential projects, reduced environmental regulation and improved mass transit, including a high-speed railway, to bring less-expensive homes within reach of jobs.

“It can’t be totally compensated by going to borrowing or by taxing and shoving that money on top of a very hot real estate market,” Brown said during his Los Angeles visit. “I wish there were a better answer, but those are the facts as they have been since the first time I ran for office.”

Kashkari Plan

Neel Kashkari -- the Republican gubernatorial candidate challenging Brown, a Democrat, in November -- has a “plan is to create jobs so that more Californians can achieve the American dream of owning a home,” Mary-Sarah Kinner, his spokeswoman, said in an e-mail. “Neel’s regulatory plan would help reduce the cost of housing, thereby helping more Californians buy homes.” She didn’t provide specific proposals.

Witte, the Related Cos. executive and a former director of the City of San Francisco Housing Authority, said it’s bad social policy to have such a low level of home affordability. His company has developed more than 9,000 low- and moderate-income units in California, including at the Emerson in downtown Los Angeles, which opens next month with 20 percent of its residences designated affordable.

“I hesitate to use the term moral obligation,” he said. “But in a progressive, civilized country, affordable-housing communities are needed to be a truly balanced society.”